China-Australia ties in need of some business-led ballast – The Australian Financial Review

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31.Jul, 2020 0 news

China-Australia ties in need of some business-led ballast – The Australian Financial Review

Other states are lifting their proverbial drawbridges as tensions in a national cabinet consisting of Morrison, plus state and territory premiers and chief ministers, run high. Meanwhile, virus testing and tracing regimes are ramping up and in Victoria they have been semi-militarised through the heavy involvement of the Australian Defence Force.

The emergency “bridge” – a massive fiscal buffer – is stretching out further, with command economy features such as “voluntary” repayment holidays on the interest on debts, job subsidies, and new agencies taking on vaguely defined co-ordinating roles in industry and mining.

More US military here

Meanwhile, the Indo-Pacific scene is alarming. Australia and the US on Wednesday signed a 10-year agreement on defence co-operation to “deter coercive acts and the use of force” amid rising tensions with China. The agreement, sealed during AUSMIN talks in Washington, contains echoes of the US-Australia military alliance in the south-west Pacific during World War II. But this time the potential adversary is China, instead of Japan.

The agreement anticipates a stronger US military presence in Australia, including establishing a strategic fuel reserve in Darwin and carrying out maintenance on US hardware such as aircraft. There’s also the prospect of more American boots on Australian ground as a result of increased joint training exercises.

Reflecting the uncertainty, an ambit tone is intruding into rapidly evolving domestic and foreign policy space. As Allan Gyngell, a former head of the Office of National Assessments, Australia’s premier intelligence analysis group, and the inaugural director of the Lowy Institute for International Policy, puts it: “The government still seems to be weighing up the issues that we’re confronting. They’re going to be cautious and offer no hostages to fortune on the way.”

Recently, Treasurer Josh Frydenberg raised the prospect of Australia adopting supply-side economic policies such as lower taxes, deregulation and privatisation that were the hallmark of the Thatcher and Reagan governments in Britain and US in the late 70s and early’ 80s, to energise a post-contagion recovery. A few days later, however, there were reports that a government-commissioned taskforce was calling for a plan to drive growth in manufacturing, generating half-a-million new jobs in the sector over the next decade.

According to these media reports, the government’s National COVID-19 Co-ordination Commission’s manufacturing taskforce has identified areas for growth in eight industries. They are food manufacturing, mining technology, defence, renewable energy, healthcare and biotechnology, recycling and packaging, advance manufacturing and aerospace.

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Its most radical recommendation was for the annual goals in the 10-year plan to be monitored by a new national manufacturing board, with industry, research and union representatives. The board would also advise on quotas for Australian-made goods when governments were making purchases in major areas, such as defence.

The COVID-19 Co-ordination Commission is headed by former Fortescue Metals Group chief executive Nev Power. Nearly a century after the then BHP boss, Sir Essington Lewis, played a similar role in World War II, the Power-led commission’s proposals for expanding manufacturing also have a wartime flavour. There are more recent comparisons, such as the ones between the proposed role for the manufacturing board and the Australian Industries Development Corporation. The AIDC was the late ’60s government investment body promoted by Jack McEwan, who was at the time deputy prime minister, minister for trade and Country (now National) Party leader.

‘We make our own decisions’

There’s also an ambit tone in foreign policy. The dominant topic is China, and the dramatic ramping up of US hostility to the Middle Kingdom in the last month by a beleaguered Trump administration. This includes imposing sanctions on senior Chinese officials over the mass internment of Muslim Uighurs in western China; declaring illegal Beijing’s claims over the South China Sea; spying charges against four Chinese nationals, and the closure of the US consulate in Houston, Texas.

The pace has been frenzied in recent weeks but the background dates back two years. According to a new book, Superpower Showdown: How the Battle Between Trump and Xi Threatens a New Cold War, China hawks in the Trump administration pushed a series of punitive measures at the end of 2018 in what some referred to internally as “F— China Week”. However, “that was as nothing compared with what happened in the month of July 2020,” according to the Economist magazine.

The US Secretary of State, Mike Pompeo has blasted what he terms the “malign” activities of the ruling Chinese Communist Party. At the same time, he has praised the Morrison government for refusing to yield to Beijing, and pushing ahead with its calls for an independent investigation into the origins of the coronavirus. “It is unacceptable for Beijing to use exports or student fees as a cudgel against Australia,” Pompeo said.

His comments formed the backdrop to the mid-week AUSMIN talks in Washington, attended by Australia’s Foreign Minister, Marise Payne, Defence Minister Linda Reynolds, Pompeo, and the US Defence Secretary, Mark Esper. Payne, herself a former Defence Minister, told a press conference that Mike Pompeo’s “positions are his own. Australia’s position is our own.

”Most importantly, from our perspective we make our own decisions, our own judgments in the Australian national interest,” Payne said.

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However, Gyngell believes Australia has not yet settled on its policy, “despite the fact that we’ve just had a defence update. The government still seems to be weighing up the issues that we’re confronting.” A victory by the Democratic Party candidate, former US Vice-President Joe Biden, at this November’s US Presidential election “would change the outlook”. An AUSMIN communique issued during a Biden administration in the White House “will be very different than under Trump, so we have to keep all our options open”.

Business must ‘be able to speak up’

“What seems to be driving the current US hostility towards the Chinese is US politics,” Gyngell says. China’s objectives, like cracking down on dissent in Hong Kong and laying claim to, and militarising, the South China Sea, “have not changed, whereas US objectives have changed, reflected in the hardening language towards China”.

“Pompeo saying we [that is, the US and other Western countries like Australia] were wrong to accommodate and engage with China makes it particularly difficult for us,” Gyngell says, citing Australia’s huge trade relationship with China and the “very different” nature of Australia’s relations with countries neighbouring China as complicating factors.

However, “the system in the US is likely to be different next year. Efforts to delegitimise China by talking about the Chinese Communist Party as if China is not a legitimate state: there will be less of all that.” Instead, a Biden victory in November would mean “there will be a clear-eyed focus on strategic competition”, including areas such as the development of 5G technology, where Chinese company Huawei is leading the way.

Gyngell draws a contrast between the conduct of Australia’s relations with China and those with Japan. There are differences, of course, including the fact Japan has less than one-11th of China’s population, is now a much smaller economy, and is an open society, albeit one where the Liberal Democratic Party has dominated most postwar administrations.

However, for this country there are also uncanny similarities, including the major role that Australian iron ore and coal exports have played in both trading relationships. The key difference in what Gyngell calls the “framework” for handling the relationship was the strong influence Australian business figures, such as Sir Maurice Mawby, one-time chairman of CRA and Comalco, had on Australia’s ties with Japan.

More recently, as China-Australia tensions rise, prominent business figures in our relations with China have been cowed by accusations of disloyalty. “The government needs to give business permission to speak up without having their character or their loyalty impugned,” according to Michael Clifton, a former boss of Austrade’s operations in China and now head of the business-backed China Matters group.

Once again, China is far more aggressive in the region than Japan has been since World War II. But in these turbulent times some business-led ballast in the conduct of Australia’s most important trading relationship would not go astray.

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